Budget 2026: How energy bills, fuel costs and savings could be affected

Households across the UK could receive some financial relief following the latest Budget announcements, with changes to energy bills, fuel duty and savings allowances aimed at helping people manage the cost of living.

Chancellor John Healey has announced a series of measures designed to give families some breathing space as household expenses continue to rise. However, with energy bills expected to increase again in January, the support may only cover part of the additional costs facing many households.

£100 energy payment for eligible households

Households in England living in properties in council tax bands A to D are set to receive a one-off £100 Household Energy Payment from January.

The payment will be funded through an additional tax on banks and is intended to help people manage rising energy costs.

The money is expected to be paid directly into bank accounts. Although it is intended to support households with energy bills, recipients will be able to spend it on other essential expenses if needed.

Council tax bands are based on property values in April 1991. Bands A to D cover properties valued at up to £88,000 at that time.

Households can check their council tax band using their annual council tax bill or the relevant government service.

The devolved administrations in Scotland, Wales and Northern Ireland will receive equivalent funding and will decide whether to introduce similar payments.

Energy bills could rise in January

Despite the planned support, households are facing the prospect of higher energy bills in the new year.

Forecasts suggest the annual bill for a typical household could rise to around £2,100 in January 2027, an increase of approximately £400 compared with current levels.

The energy price cap for a typical household paying by direct debit has already risen to £1,723 for the October to December 2026 period.

The projected increase means the £100 payment will cover only a fraction of the potential additional annual cost for affected households.

The Government has also confirmed that the reduction in VAT on electricity bills, introduced in October, will be extended until July. The measure had previously been due to end in April.

Gas standing charges to be scrapped

Another planned change will affect the daily standing charges that households pay for their gas supply.

The Government intends to remove gas standing charges in England, Scotland and Wales next year, or as soon as possible afterwards.

Standing charges are fixed daily fees that customers pay regardless of how much gas they use. Under the proposed changes, these costs will instead be incorporated into the price charged for each unit of energy consumed.

According to Treasury estimates, around 60% of households could save an average of £45 a year under the new arrangements.

Households that use less gas are expected to benefit the most, while those consuming larger amounts could pay more than they currently do.

The changes could therefore have different effects depending on household size, energy consumption and individual circumstances.

The Government has also indicated that it wants to extend similar reforms to electricity standing charges in the future.

Fuel duty cut extended for drivers

Drivers will continue to benefit from the temporary 5p-per-litre reduction in fuel duty on petrol and diesel.

The reduction, originally introduced in 2022 under former prime minister Rishi Sunak, had been scheduled to begin phasing out in January.

The latest Budget announcement extends the cut until July, keeping fuel duty at 52.95p per litre.

The decision comes as motorists continue to face pressure from rising fuel prices, with the ongoing impact of the conflict involving Iran contributing to higher costs.

Diesel prices have recently exceeded £2 per litre, while the cost of filling a typical family car has increased substantially since late February.

Estimates suggest filling a typical car with diesel now costs around £30 more than it did in late February, while filling a petrol car costs approximately £23 more.

Extending the fuel duty reduction will help avoid an additional increase resulting from the planned withdrawal of the tax cut, although it does not guarantee that pump prices will fall.

Cash ISA allowance plans abandoned

The Budget also brings a change for people saving money through Individual Savings Accounts, commonly known as ISAs.

The Government has abandoned plans announced by former chancellor Rachel Reeves to reduce the annual cash ISA allowance for people under 65.

Under the previous proposal, the amount younger savers could place into cash ISAs each year without paying tax on the interest would have fallen from £20,000 to £12,000 from April 2027.

The proposed reduction was intended to encourage more people to invest in stocks and shares rather than keeping their savings in cash accounts.

However, the latest announcement means the planned restriction will not go ahead, allowing eligible savers to retain the existing £20,000 annual allowance.

The Government also intends to introduce a new Starter ISA aimed at first-time investors, although further details will be needed to explain how the new account will operate.

What the Budget means for households

The latest measures offer several forms of potential support, including a one-off payment for eligible households, an extended fuel duty reduction and changes intended to reduce some energy costs.

However, the overall impact will depend on individual circumstances.

Households in council tax bands A to D in England will be eligible for the proposed £100 energy payment, while the removal of gas standing charges could benefit lower-energy users but increase costs for some higher users.

Drivers will retain the temporary fuel duty reduction until July, and cash savers will avoid the previously proposed reduction in their annual ISA allowance.

With energy bills forecast to rise in January, households may still need to plan carefully for their winter expenses.

The measures are intended to ease some of the financial pressure facing families, but the extent of any savings will depend on energy consumption, fuel use and individual financial circumstances.

As further details emerge, households will need to check the eligibility criteria and implementation dates for the measures that affect them.